TD profit falls 27%, bad loan provisions rise
Toronto Dominion Bank reassured investors yesterday its banking business is on solid ground despite the relentless tremors in the stock market and economy.
The bank reported that while revenues were up for the first quarter, net profits fell sharply and it has set aside twice as much money for bad loans compared with last year.
Ed Clark, president and chief executive officer of TD Bank Financial Group said the overall results were strong, given the circumstances.
"While we expect a worsening economic environment, we’re confident we’ve built businesses that will emerge from the downturn with momentum," he said.
"We’re going to have to work to keep earnings per share flat year-over-year. Even that’s going to take some doing if the economy turns out as bad as everyone says it’s going to be," Clark told industry analysts.
He added that while times are tough for the bank, it’s surely much tougher on its customers.
"We’re trying to say to our clients and customers don’t wait until you have a problem; come and talk to us. We want to help customers and clients get ahead of the issues they’re facing," Clark said.
TD reported revenue of $4.15 billion for the three months ended Jan. 31, up from $3.6 billion a year ago.
Net income fell 27 per cent to $712 million, down from $970 million in the year-earlier quarter. Earnings per share fell to 82 cents, down from $1.33.
The bank more than doubled its provisions for bad loans for the quarter to $537 million from $255 million.
"I think the earnings were pretty good considering the difficulties in the operating environment," Craig Fehr, financial industry analyst with Edward Jones in St. Louis, Mo., said in an interview.
"Not all that surprising was that loan loss provisions were up sharply, and I think that’s going to be a trend that we will continue to see for the remainder of the year."
TD shares rose 60 cents on the Toronto Stock Exchange yesterday to $35 advanced payday loan.85. The shares are down 18 per cent this year and the price has been cut in half since last May.
TD was the first of the big five Canadian banks to report earnings for the November to January period, a quarter marked by rising unemployment, falling consumer spending and deep losses on the stock market, as well as unprecedented levels of government stimulus intended to get the wheels of the world’s economy turning again.
Investors were particularly worried about TD’s exposure to the United States, where real estate values have plunged and unemployment and delinquent loans are rising.
The bank has spent more than $15 billion (U.S.) in the past four years expanding in the U.S., buying Maine-based TD Banknorth and New Jersey-based Commerce Bankcorp Inc.
TD seems to have reassured investors that its "loan quality is reasonable in this environment and TD will be able to manage through," Fehr said.
On the Canadian personal and business banking side, TD Canada Trust posted earnings of $584 million in the first quarter, down 2 per cent from the same period last year.
Revenues were up 7 per cent, or $145 million, compared with last year, as TD managed to bring in more business, particularly in personal and business deposits.
U.S. consumer-banking profit rose 89 per cent to $240 million.
TD’s wealth management business, including TD Ameritrade, earned $152 million in the quarter, down 30 per cent from the first quarter of last year.
Noting that the "operating environment will likely get worse before it gets better," Clark added the bank is moving forward with plans to open 20 new branches.
Royal Bank of Canada and Canadian Imperial Bank of Commerce are slated to report financial results today. Scotiabank and Bank of Montreal report Tuesday, March 3.
Filed under: finance by Wolf